Millions of dollars for racetracks tied up in court battle

By James Fuller
5/25/10

While Illinois racetracks fear the sounding of their final bugle as soon as this summer, millions of dollars already designed to help save them are sitting in an account untouched.

State lawmakers may vote to allow racetracks, including Arlington Park, to install slot machines as soon as this week. But four years ago, they voted to create a tax forcing the state's four riverboat casinos in Elgin, Aurora and Joliet to prop up the horse racing industry. There is at least $100 million sitting in a bank account as a legal battle involving the ghost of former Gov. Rod Blagojevich's tenure crawls through the appeals process.

The state passed a law in 2006 that placed a 3 percent tax on the four riverboat casinos. But that tax sat in limbo until June 2008 while the casinos fought the law's constitutionality all the way to the Illinois Supreme Court. Casinos still paid the tax while the issue was tied up in court, but the cash (some $80 million in 2008) sat in an account awaiting the legal ruling. The court ruled the tax valid, and Arlington Park stood to gain its share of the money waiting in the account plus nearly $11 million a year from the casinos based on 2006 gambling profits.

However, the court handed down the ruling a few days after the tax expired, throwing it into limbo once again. Followers of Illinois politics may be somewhat familiar with what happened next as the push to extend the law became a part of the eventual arrest of former Gov. Rod Blagojevich. Blagojevich referenced the extension of the law in some of the phone taps released in the case. Even with that, state lawmakers eventually extended the tax until Dec. 15, 2011, or the date when any horse track (such as Arlington Park) gets slots or video gambling, or the state's 10th casino (in Des Plaines) begins operating.

But Blagojevich's arrest opened the door to a new legal battle with the riverboats alleging a conspiracy between Blagojevich and a racetrack owner to extend the tax. That legal battle is now in the 7th Circuit Court of Appeals. Meanwhile, the tax continues to be collected and sit in the fund helping neither the racetracks nor the riverboats.

Anthony Somone, executive director of the Illinois Harness Horseman's Association, estimated that there is easily more than $100 million in the tax account by now. That alone is enough money to keep the racing industry in Illinois in business for another year or more, he said.

"The industry is on life-support," Somone said. "The reason is, quite frankly, that our product is (terrible). All the best trainers and owners have taken their horses elsewhere because we don't have purse money to race for. And we have not seen one dime of that tax money. That money is breathing room. I don't know if we race a year from now without it."

But while the tax money is breathing room, finally receiving it won't end the need for slot machines at the racetracks, Somone said. When it comes to gambling, and now video gambling, the racetracks just want to be on a level playing field with the riverboats and local taverns and restaurants, he explained.

"It's absolutely ludicrous to me that you can go gamble at Bob's Tavern across the street from Arlington Park, but you can't go gamble at Arlington Park itself," Somone said. "All we have ever wanted is to be on a level playing field."